The US Department of Defense (DoD) has awarded UnitedHealth, the nation’s biggest health insurer by revenue, its western military health contract valued at as much as $20.5 billion, says an article by Bloomberg. TriWest Healthcare Alliance Corp has held the contract since 2003.

UnitedHealth had $102 billion in revenue last year. In June 2011 it lost a separate challenge for a $23.5 billion contract for the south region, covered by Louisville, Kentucky-based Humana Inc.

"It's a huge strategic win for them because they're not in the military space," said Ana Gupte, an analyst with Sanford C. Bernstein & Co in New York. "It just extends the reach of United into every part of health benefits in the United States."

TriWest, Humana, and HealthNet Inc currently are the main managed care providers for Tricare, the military's health care program. The DoD contract replacing TriWest with UnitedHealth is effective April 1, 2013. The loss of the new contract essentially would erase much of TriWest's revenue stream, says Bloomberg.

The award comes after TriWest agreed to pay a $10 million fine in September to settle a federal whistleblower lawsuit. The suit, filed in US District Court in San Francisco by 4 former employees, accused the company of submitting claims to the government without including discounts negotiated with service providers.